Subprime Rally Building as Dealers Sop Up Supply: Credit Markets
This article is for subscribers only.
The rally in U.S. home-loan securities without government backing is accelerating as investors wager the housing bust is over and supply is sopped up by bond dealers emboldened by new capital rules.
Gains on subprime-mortgage bonds from 2005 through 2007, the years that produced the most defaults leading to the worst financial crisis since the Great Depression, have soared to 5.4 percent in July, bringing returns for the year through last week to 21.6 percent, according to Barclays Plc data. Securities backed by option adjustable-rate mortgages jumped over the past month by 7 percent to the highest level since May 2011.